Raiffeisen International Bank-Holding AG, which is part of the Raiffeisen Zentralbank Osterreich AG (RZB) Group, continued its strong organic growth course in the third quarter 2007. Consolidated profit (after tax and minorities) for the first nine months of 2007 rose by 43.1 per cent to 625.7 million euros (Q3 2006: 437.4 million euros). Profit before tax went up by 46.5 per cent to 953.4 million euros (Q3 2006: 650.6 million euros), while profit after tax grew by 44.6 per cent to 736.6 million euros (Q3 2006: 509.4 million euros). (All figures are based on International Financial Reporting Standards (IFRS).)

Again the best quarterly result in the Group’s history

Consolidated profit for the third quarter of 2007 came to 224 million euros and, excluding one-off effects from last year, was again the best quarterly result in the Group's history. It was about 16 million euros higher than in the second quarter of 2007 and 51 percent, or 76 million euros, higher than in the comparable quarter last year (Q3 2006: 148 million euros).

«This quarterly result proves once again that we are very well positioned both on a strategic as well as on an operative level. The turbulent environment on the global financial and credit markets had no substantial impact on our business model or on our growth course. Our strategic position in one of the most attractive economic growth regions enables us to continue our strong organic growth while increasing our profitability at the same time», commented Herbert Stepic, CEO of Raiffeisen International, on the results.

Return on equity reaches 28 per cent

The return on equity (ROE) before tax improved again in the third quarter and stands at 28.0 per cent. That represents an increase on the full year 2006 by 0.7 percentage points and was achieved despite unusually high profit retention due to one-off effects.

Last year was influenced by two one-off effects, the sale of Raiffeisenbank Ukraine in the fourth quarter and the sale of a stake in Bank TuranAlem in the third quarter, whose combined positive impact on consolidated profit came to ˆ 588 million. For the sake of better comparability with last year, these effects are not included in the comparative figures.Furthermore, changes in the scope of consolidation — the additions of Impexbank in the second quarter of 2006 and eBanka and the disposal of Raiffeisenbank Ukraine in the fourth quarter of 2006 — had effects on earnings components. Three asset management companies and four insurance brokers were also included in the scope of consolidation at the beginning of 2007 for reasons of materiality.

The consolidated ROE (after tax and minorities) again came to over 20 per cent. At 21.2 per cent, it was only 0.2 percentage points below the 2006 figure. In the first three quarters of 2007, earnings per share improved on the comparable period last year by 0.62 euros to 4.40 euros. Performance ratios for the full year 2007 will probably decline slightly because of the 1.2 billion euros capital increase successfully conducted by Raiffeisen International at the beginning of October 2007.

The core capital ratio (Tier 1), banking book, which is of significance for assessing financial strength, amounted to 8.3 per cent (31 December 2006: 9.8 per cent). The core capital ratio (Tier 1), including market risk, amounted to 7.7 per cent (31 December 2006: 9.0 per cent). These figures do not include proceeds from the capital increase.

«Our capital resources are comfortable and will be further improved through the proceeds from the successfully completed capital increase. We dispose of the necessary operating leeway to continue our organic growth as well as to be able to react swiftly to market opportunities when they emerge», said Martin Grull, CFO of Raiffeisen International.

Operating result further improved

Operating earnings increased again in the third quarter compared with the preceding quarters, and the Group again achieved the best result in its history. The quarterly operating profit of 452 million euros was 15 per cent, or 59 million euros, above the second quarter of 2007 and 116 million euros above the third quarter of 2006 (Q3 2006: 336 million euros).

Altogether, operating profit came to 1,200 million euros in the first three quarters of 2007 and thus grew by 37 per cent on the same period last year (Q3 2006: 877 million euros).

Operating income increased to 2,738 million euros in the first nine months of 2007, which represents a plus on the comparable period of 2006 of 35 per cent, or 704 million euros (Q3 2006: 2,034 million euros). Net interest income, the most important income component, rose by 453 million euros to 1,704 million euros. Compared with last year, interest margins were constant in Central Europe and down slightly in Southeastern Europe, while significant increases were achieved in the CIS. Net commission income likewise shows significant growth by 35 per cent, or 234 million euros. It reached 895 million euros by September 2007, with the increase driven by consistently higher income from fees and commissions for nearly all bank products (Q3 2006: 661 million euros). The increase of trading profit was less significant, with growth on 2006 of 8 per cent, or 9 million euros, to 121 million euros (Q3 2006: 112 million euros).

Compared with the same period last year, provisioning for impairment losses rose by 6 per cent, or 13 million euros, to 242 million euros (Q3 2006: 229 million euros). Altogether, almost 60 per cent, or 139 million euros, of that was formed in the CIS, mainly due to strong loan growth in this region. At 22.8 per cent, the CIS showed by far the highest risk/earnings ratio of all the regional segments, with more than half of the provisions being portfolio-based. Actual losses (i.e. loans written off as non-recoverable) in this region stood at 14 million euros by September 2007. The other two regions registered significantly lower risk/earnings ratios of 11.8 per cent for Central Europe and 6.7 per cent for Southeastern Europe, which is also due to write-backs of previously formed provisions.

The risk/earnings ratio amounted to 14.2 per cent overall. About 70 per cent of all provisions were formed for Retail Customers, and the rest in the Corporate Customers segment. The latter also benefited from write-backs of certain relatively large provisions for impairment losses.

General administrative expenses rose by 33 per cent compared to the same period in the previous year to 1,538 million euros and hence somewhat less than operating income (Q3 2006: 1,156 million euros). The cost/income ratio came to 56.2 per cent, thus improving by 2.9 percentage points on the end of 2006 and by 0.7 percentage points on the comparable period of 2006. The share of general administrative expenses attributable to staff expenses increased by 1 percentage point to 49 per cent, which is due to higher staff costs in certain countries and an increase in the average number of employees by 14 per cent to 54,679.

Continuous strong growth of balance sheet total

Raiffeisen International again registered significant growth of its balance sheet total. At the end of September, the consolidated balance sheet total stood at 67.5 billion euros and was thus up by 21 per cent compared with the end of 2006 (55.9 billion euros). Growth in the third quarter came to just under 8 per cent, the highest rate of this year's first three quarters.

The increase on the asset side was driven by lending growth. Loans and advances to customers rose from the beginning of the year by almost 30 per cent to 45.4 billion euros on the reference date. Adjusted for impairment loss provisioning, they thus account for 66 per cent of the balance sheet total. Significant growth was registered in all regions. The loan portfolio increased the most in relative terms in the Group units of the CIS, with a plus of 36 per cent, or 3.6 billion euros. On the liability side, customer deposits rose by about 12 per cent. Increasing to 37.2 billion euros, customer deposits grew most significantly in Southeastern Europe, by 15 per cent, or 1.7 billion euros. The remaining funding was accomplished primarily by borrowing from international commercial banks. The balance sheet item deposits from banks rose by 43 per cent to 19.8 billion euros, with the RZB Group accounting for 54 per cent.

Initial consolidations and exchange rate movements had no effects worth mentioning on the balance sheet total in the first three quarters of 2007. Together, they amounted to under one per cent of growth.

Over 13 million customers served in more than 3,000 branches

Raiffeisen International welcomed its 13 millionth customer in September. Originally geared primarily to business with corporate customers, the Group began serving private individuals and small and medium-sized enterprises on a wide scale in 1999 and steadily expanded this segment. It had a total of 5.0 million customers at the end of 2004, and already 12.1 million by the end of 2006. Raiffeisen International is continuously expanding its distribution network parallel to the growing number of its customers. In Tyumen, about 2,100 kilometers east of Moscow, the 3,000th business outlet was officially opened.

Raiffeisen International already ranks first among international banking groups in five CEE-markets in terms of the number of business outlets (Albania, Belarus, Kosovo, Russia and Ukraine). More than half of the 3,000 branches are located in the fastest-growing banking markets of the CIS. «We have an unparalleled distribution power among international banks in the most promising banking markets in Europe», said Stepic.

As at 30 September 2007 the total network of business outlets comprised 3,023 branches (31 December 2006: 2,848). On balance Raiffeisen International opened 175 new branches in the first nine months of the year.

Since the beginning of the year the number of employees increased by 8.1 per cent to a total of 57,019.

Segment reporting

Southeastern Europe continues to make highest earnings contribution

As in the preceding quarter, the Southeastern Europe segment registered by far the largest increase in profit before tax, with a plus of almost 70 per cent, or 143 million euros, to 348 million euros (Q3 2006: 205 million euros). This is due to further improvement of cost efficiency in the region and low new allocations to provisions for impairment losses.

The Group also achieved a significant increase of earnings before tax in Central Europe by 50 per cent, or 116 million euros, to 347 million euros (Q3 2006: 231million euros). In the CIS, earnings before tax grew by 21 per cent, or 45 million euros, to 259 million euros, excluding the one-off effect of selling the minority stake in Bank TuranAlem in the third quarter of 2006 (Q3 2006: 214 million euros).

The region of Southeastern Europe contributed the most to profit before tax, with a share of 37 per cent. Central Europe was the second-largest source of earnings at 36 per cent. The CIS accounted for 27 per cent of earnings.

The shares of balance sheet assets attributable to the individual segments remained nearly unchanged in comparison with September 2006. Central Europe continued to dominate with a 41 per cent share of Group assets. That region was followed by Southeastern Europe with 32 per cent, and the CIS with 27 per cent.

Earnings in Retail Customers segment up 61 per cent

Earnings before tax in the Retail Customers segment improved by 61 per cent on the comparable period to 354 million euros (Q3 2006: 219 million euros). The return on equity increased by 2.8 percentage points to 30.6 per cent. That is primarily due to growth of operating income, which came to 37 per cent and thus outpaced that of general administrative expenses at 33 per cent. Despite continued business outlet expansion, the cost/income ratio thus improved by 2.3 percentage points to 67.2 per cent. The increase of operating income was primarily driven by net interest income (plus 38 per cent to 1,028 million euros) and net commission income, which at 572 million euros was 36 per cent higher than in the comparable period. The increase is due not least to a rise in the number of customers to over 13 million and the resulting greater business volume. As a consequence of focusing on retail business, the segment's share of total earnings grew to 37 per cent (first to third quarter of 2006: 34 per cent).

Significant gains were also registered in the Corporate Customers segment, whose earnings before tax rose on the comparable period by 48 per cent to 518 million euros (Q3 2006: 350 million euros). In addition to increased operating business — net interest income rose by 32 per cent to 570 million euros and net commission income by 33 per cent to 310 million euros — a reduction of provisioning for impairment losses by 20 per cent due to some write-backs also contributed to the improvement. The cost/income ratio was nearly unchanged at 34.5 per cent. Other operating profit also increased by 12 million euros due to more business in operating leasing. The return on equity improved by 1.2 percentage points to 32.9 per cent, which was the best ratio achieved in any segment. Business volume (based on risk assets) increased by 37 per cent year-on-year, with new business in the CIS up by more than 50 per cent. The Corporate Customer segment is still the largest profit contributor with a share of 54 per cent in profit before tax.

At 124 million euros, earnings in the Treasury segment remained 13 per cent below the year-earlier level (Q3 2006: 143 million euros). That was caused by higher general administrative expenses on largely constant operating income. While increases of earnings from operating business were achieved, the constancy of operating income resulted from a one-off positive remeasurement last year, which stemmed from a foreign exchange position taken in connection with Impexbank.

Outlook and Targets unchanged

The Corporate Customer business is again expected to make the largest contribution to overall profit in 2007. Raiffeisen International intends to intensify the focus on the mid-market segment this year. The focus within the fast developing retail division will be on further expansion of the Group’s network of branch offices, the development of alternative distribution channels and the accelerated sale of asset management and insurance products.

For 2007, Raiffeisen International targets a consolidated profit of at least 750 million euros.

For the period to 2009, Raiffeisen International targets annual growth of its balance sheet total by at least 20 per cent. The largest increases should continue to come from the CIS despite the absence of Raiffeisenbank Ukraine.

For the year 2009, the management has set the goal to achieve a return on equity (ROE) before tax of more than 25 per cent, a cost/income ratio of below 58 per cent and a risk/earnings ratio of about 15 per cent.

The interim report for the third quarter 2007 can be accessed at: http://qr032007.ri.co.at/ A printed copy can also be ordered at that address.

Raiffeisen International operates one of the largest banking networks in CEE. 18 markets of Europe’s growth region are covered by subsidiary banks, finance leasing companies, two representative offices and a number of other financial service providers. Over 13 million customers are attended to through more than 3,000 business outlets. Raiffeisen International is a fully consolidated subsidiary of Raiffeisen Zentralbank Osterreich AG (RZB), which owns 68.5 per cent of the common stock. The balance is free float, the shares are traded on the Vienna Stock Exchange. RZB is a leading corporate and investment bank in Austria and the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group.